Karabakh Conflict Negatively Affecting South Caucasus Region

Published: 04-13-2017

The Nagorno-Karabakh conflict had a noticeable economic impact on Armenia and Azerbaijan, Fuad Shahbazov, foreign affairs and political analyst, wrote in his article published by the International Policy Digest.

“As a result of the Armenian aggressive policy during the war, about 900 Azerbaijani villages were looted and more than 20,000 Azerbaijanis were killed and 20 percent of Azerbaijani’s territory was occupied by Armenian forces and the economic security of the country was at risk,” the author wrote.

“As a result of the war nearly 7,000 Azerbaijan establishments were closed, which had provided 24 percent of grain revenues, 41 percent of liqueur production, 46 percent of potato production, 18 percent of meat production and 34 percent of milk production,” reads the article. “Armenia seized about 25 percent of the total forested area of Azerbaijan and various rich deposits of mineral resources such as gold, chromite and copper. Using these deposits Armenia claims that it has become one of the world’s leading exporters of precious metals.”

“During the war the irrigation system in the Nagorno-Karabakh region was destroyed as well,” the article said.

Consequently, five districts of Azerbaijan outside the occupied territories were left without irrigation and revenue, the article noted.

“According to the United Nations, total economic damage is estimated to be around $53.5 billion,” reads the article. “Despite all these economic challenges in the 1990s, Azerbaijan was able to overcome the economic crisis. Using its oil resources efficiently Azerbaijan experienced an economic boom and in 2006 became the country with the highest GDP growth (34.5 percent) in the world.”

“Because of signed oil contracts with European countries, the EU became Azerbaijan’s main trading partner,” the author said. “Trade turnover reached $31 billion in 2014, which is 24 times more compared to 1995. This remarkable economic development following the war made Azerbaijan’s economy the most powerful in the South Caucasus region.”

“Following the occupation Armenia faced the worst social and economic problems in the region,” the article said. “By 1993, GDP in Armenia had declined to 47 percent. Inflation rose to 5,000 percent in 1994 and poverty increased from around 20 percent in 1988 to around 55 percent by 1996. As a result of the occupation Armenia’s borders were closed by Azerbaijan and Turkey. Georgia became the only export route for exports to Europe and Russia, which made Armenian economy vulnerable to economic instability in Georgia.”

Therefore, in 2008, during the Russia-Georgia war because of the border closure Armenia lost about $600-700 million in export and faced a shortage of wheat and gasoline, the author wrote.

“The Armenian government also lost regional transport projects,” the article said. “Losing the potential to be a transit country for transporting Azerbaijan oil and gas and not being part of the “One Belt, One Road” initiative proposed by China, puts Armenian future socio-economic development at risk which increases its political and economic dependence on Russia. Despite these negative consequences, the Armenian government is not willing to return the occupied territories which impacts Armenians who live in poverty and foments discontent.”

In general terms the Nagorno-Karabakh conflict destroyed the integrity of the South-Caucasus region, wrote the author, adding that the entire occupied region, full of natural resources and production opportunities, remains almost unused.

Chances of a resolution of the conflict with peace talks still exists which is very important for the region’s development and prosperity, according to the article.